EXHIBIT 10.2
BAKER HUGHES INCORPORATED
2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF MARCH 6, 2002)
Baker Hughes Incorporated
March 6, 2002
TABLE OF CONTENTS
Article 1. Establishment, Objectives and Duration......................................... 1
Article 2. Definitions and Construction................................................... 1
Article 3. Administration................................................................. 8
Article 4. Shares Subject to Plan and Maximum Awards...................................... 9
Article 5. Eligibility and Participation.................................................. 12
Article 6. Stock Options.................................................................. 12
Article 7. Stock Appreciation Rights...................................................... 15
Article 8. Restricted Stock and Restricted Stock Units.................................... 17
Article 9. Performance Units, Performance Shares and Cash-Based Awards; Stock Awards...... 18
Article 10. Performance Measures........................................................... 20
Article 11. Beneficiary Designation........................................................ 21
Article 12. Deferrals...................................................................... 21
Article 13. Rights of Employees/Directors.................................................. 21
Article 14. Acceleration................................................................... 22
Article 15. Amendment, Modification, Suspension and Termination............................ 22
Article 16. Withholding.................................................................... 23
Article 17. Successors..................................................................... 23
Article 18. General Provisions............................................................. 23
Baker Hughes Incorporated
March 6, 2002
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BAKER HUGHES INCORPORATED
2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES AND DURATION.
1.1 ESTABLISHMENT. Baker Hughes Incorporated, a Delaware
corporation (the "Company"), hereby establishes an incentive
compensation plan to be known as the "Baker Hughes Incorporated 2002
Long-Term Incentive Plan" (this "Plan"), to reward certain directors,
corporate officers and key employees of the Company by enabling them to
acquire shares of common stock of the Company and to receive other
compensation based on common stock of the Company or certain
performance measures. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units,
Stock Awards and Cash-Based Awards (as this Plan defines each of those
terms below).
Subject to approval by the Company's stockholders,
this Plan shall become effective as of March 6, 2002 (the "Effective
Date") and shall remain in effect as provided in Section 1.3.
1.2 OBJECTIVES. This Plan is designed to attract and
retain key employees of the Company and its Affiliates (defined below),
to attract and retain qualified directors of the Company, to encourage
the sense of proprietorship of those employees and directors and to
stimulate the active interest of these persons in the development and
financial success of the Company and its Affiliates. These objectives
are to be accomplished by making Awards (defined below) under this Plan
and thereby providing Participants (defined below) with a proprietary
interest in the growth and performance of the Company and its
Affiliates.
1.3 DURATION. This Plan shall commence as of the
Effective Date and shall remain in effect, subject to the right of the
Board of Directors to amend or terminate this Plan at any time pursuant
to Article 15, until all Shares subject to it shall have been purchased
or acquired according to this Plan's provisions. However, in no event
may an Award be granted under this Plan on or after the tenth
anniversary of the Effective Date.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION.
2.1 Whenever used in this Plan, the following capitalized
terms in this Section 2.1 shall have the meanings set forth below, and
when the meaning is intended, the initial letter of the word shall be
capitalized:
"AFFILIATE" shall have the meaning ascribed to such
term in Rule 12b-2 of the General Rules and Regulations of the
Exchange Act.
"AWARD" means, individually or collectively, a grant
under this Plan to Employees of Nonqualified Stock Options,
Incentive Stock Options, Stock
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March 6, 2002
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Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Cash-Based Awards or
Stock Awards and to Directors of Nonqualified Stock Options,
Restricted Stock, Restricted Stock Units or Stock Awards.
"AWARD AGREEMENT" means either (a) an agreement that
the Company and a Participant enters into that sets forth the
terms and provisions applicable to an Award granted under this
Plan or (b) a statement that the Company issues to a
Participant describing the terms and provisions of the Award.
"BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall
have the meaning ascribed to the term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.
"BOARD" or "BOARD OF DIRECTORS" means the Board of
Directors of the Company.
"CASH-BASED AWARD" means an Award granted to a
Participant as described in Article 9.
"CAUSE" for termination by the Company of the
Employee's employment means (a) the willful and continued
failure by the Employee to substantially perform the
Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a notice of termination for Good
Reason by the Employee) after a written demand for substantial
performance is delivered to the Employee by the Committee,
which demand specifically identifies the manner in which the
Committee believes that the Employee has not substantially
performed the Employee's duties, or (b) the willful engaging
by the Employee in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of Sections (a) and (b)
of this definition, (i) no act, or failure to act, on the
Employee's part shall be deemed "willful" unless done, or
omitted to be done, by the Employee not in good faith and
without reasonable belief that the Employee's act, or failure
to act, was in the best interest of the Company and (ii) in
the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists shall be
given effect unless the Company establishes to the Committee
by clear and convincing evidence that Cause exists.
A "CHANGE IN CONTROL" of the Company shall be deemed
to have occurred as of the first day that any one or more of
the following conditions shall have been satisfied:
(a) Any Person is or becomes a
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by this Person any
securities acquired directly from the Company or its
Affiliates) representing 30% or more of the combined
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March 6, 2002
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voting power of the Company's then outstanding
securities, excluding any Person who becomes, as
described in this Section (a), a Beneficial Owner in
connection with a transaction described in Section
(c)(i) of this definition below; or
(b) The following individuals cease for
any reason to constitute a majority of the number of
Directors then serving: individuals who, on the
Effective Date, constitute the Board of Directors of
the Company and any new Director (other than a
Director whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of Directors of the
Company) whose appointment or election by the Board
of Directors of the Company or nomination for
election by the Company's stockholders was approved
or recommended by a vote of at least 2/3 of the
Directors then still in office who either were
Directors on the date hereof or whose appointment,
election or nomination for election was previously so
approved or recommended; or
(c) There is consummated a merger or
consolidation of the Company or any direct or
indirect subsidiary of the Company with any other
corporation, other than (i) a merger or consolidation
that would result in the voting securities of the
Company outstanding immediately prior to such merger
or consolidation continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity or any
parent thereof), in combination with the ownership of
any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any
Affiliate, at least 55% of the combined voting power
of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately
after such merger or consolidation or (ii) a merger
or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities Beneficially Owned by this Person any
securities acquired directly from the Company or its
Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a
business) representing 30% or more of the combined
voting power of the Company's then outstanding
securities; or
(d) There is consummated a merger or
consolidation of the Company or any direct or
indirect subsidiary of the Company with any other
corporation, other than a merger or consolidation
immediately following which the individuals who
comprise the Board immediately prior thereto
constitute at least a majority of the board of
directors of the entity surviving such merger or any
parent thereof (or a majority plus one member where
such board is comprised of an odd number of members);
or
(e) The stockholders of the Company
approve a plan of complete liquidation or dissolution
of the Company or there is
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March 6, 2002
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consummated an agreement for the sale or disposition
by the Company of all or substantially all of the
Company's assets, other than (i) a sale or
disposition by the Company of all or substantially
all of the Company's assets to an entity, at least
55% of the combined voting power of the voting
securities of which are owned by stockholders of the
Company in substantially the same proportions as
their ownership of the Company immediately prior to
such sale, or (ii) where the individuals who comprise
the Board immediately prior thereto constitute at
least a majority of the board of directors of such
entity or any parent thereof (or a majority plus one
member where such board is comprised of an odd number
of members).
Notwithstanding the foregoing, a "Change in
Control" shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated
transactions immediately following which the record holders of
the common stock of the Company immediately prior to such
transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity
that owns all or substantially all of the assets of the
Company immediately following such transaction or series of
transactions.
"CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
"COMMITTEE" means the Compensation Committee of the
Board or such other committee of the Board or the entire Board
as the Board designates to administer Awards to Employees, as
specified in Article 3.
"COMPANY" shall have the meaning ascribed to that
term in Section 1.1.
"DIRECTOR" means any individual who is a member of
the Board of Directors of the Company; provided that any
Director the Company employs shall be considered an Employee
under this Plan.
"EFFECTIVE DATE" shall have the meaning ascribed to
that term in Section 1.1.
"EMPLOYEE" means (i) any employee of the Company or
any of its Affiliates or (ii) an individual who has agreed to
become an Employee of the Company or any of its Affiliates and
is expected to become an Employee within the following 6
months.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act.
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March 6, 2002
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"FAIR MARKET VALUE" means the value per Share as
determined by the Committee, based on the composite
transactions in Shares as reported by The Wall Street Journal,
and shall be equal to the per share price of the last sale of
Shares on the trading day prior to the date on which value is
being determined.
"FISCAL YEAR" means the year commencing January 1 and
ending December 31.
"FREESTANDING SAR" means an SAR that is granted
independently of any Option, as described in Article 7.
"GOOD REASON" for termination by the Employee of the
Employee's employment means the occurrence (without the
Employee's express written consent) after any Change in
Control, or prior to a Change in Control under the
circumstances described in clauses (b) and (c) of Section 14.2
hereof, of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act
or failure to act described in paragraph (a), (e), (f) or (g)
below, such act or failure to act is corrected prior to the
effective date of the Employee's termination for Good Reason;
(a) the assignment to the Employee of any duties
inconsistent with the status of the Employee's position with
the Company or a substantial adverse alteration in the nature
or status of the Employee's responsibilities from those in
effect immediately prior to the Change in Control;
(b) a reduction by the Company in the Employee's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
individuals having a similar level of authority and
responsibility with the Company and all individuals having a
similar level of authority and responsibility with any Person
in control of the Company;
(c) the relocation of the Employee's principal
place of employment to a location more than 50 miles from the
Employee's principal place of employment immediately prior to
the Change in Control or the Company's requiring the Employee
to be based anywhere other than such principal place of
employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent
substantially consistent with the Employee's present business
travel obligations;
(d) the failure by the Company to pay to the
Employee any portion of the Employee's current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all individuals having a similar level of
authority and responsibility with the Company and all
individuals having a similar level of authority and
responsibility with any Person in control of the Company, or
to pay to the Employee any portion of an installment of
deferred compensation
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March 6, 2002
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under any deferred compensation program of the Company, within
7 days of the date such compensation is due;
(e) the failure by the Company to continue in
effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or
the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms
of the amount or timing of payment of benefits provided and
the level of the Employee's participation relative to other
participants, as existed immediately prior to the Change in
Control;
(f) the failure by the Company to continue to
provide the Employee with benefits substantially similar to
those enjoyed by the Employee under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Employee was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
individuals having a similar level of authority and
responsibility with the Company and all individuals having a
similar level of authority and responsibility with any Person
in control of the Company), the taking of any other action by
the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Employee of any
material fringe benefit or perquisite enjoyed by the Employee
at the time of the Change in Control, or the failure by the
Company to provide the Employee with the number of paid
vacation days to which the Employee is entitled on the basis
of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the
Change in Control; or
(g) if the Employee is party to an individual
employment, severance, or similar agreement with the Company,
any purported termination of the Employee's employment which
is not effected pursuant to the notice of termination or other
procedures specified therein satisfying the requirements
thereof; for purposes of this Plan, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's
employment for Good Reason shall not be affected by the
Employee's incapacity due to physical or mental illness. The
Employee's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
For purposes of any determination regarding the
existence of Good Reason, any claim by the Employee that Good
Reason exists shall be presumed to
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March 6, 2002
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be correct unless the Company establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
"INCENTIVE STOCK OPTION" or "ISO" means an option to
purchase Shares granted under Article 6 and that is designated
as an incentive stock option and that is intended to meet the
requirements of Code Section 422, or any successor provision.
Incentive Stock Options may only be granted to Participants
who are officers and key employees of the Company.
"NONQUALIFIED STOCK OPTION" or "NQSO" means an Option
that is not intended to meet the requirements of Code Section
422, or that otherwise does not meet such requirements.
"OPTION" means an Incentive Stock Option or a
Nonqualified Stock Option, as described in Article 6.
"OPTION PRICE" means the price at which a Participant
may purchase a Share pursuant to an Option.
"PARTICIPANT" means an Employee or Director who has
been selected to receive an Award or who has an outstanding
Award granted under this Plan.
"PERFORMANCE-BASED AWARD" means a Performance Share,
a Performance Unit, a Cash-Based Award or a Stock Award
granted to a Participant, as described in Article 9, of which
the fulfillment of performance goals determines the degree of
payout or vesting.
"PERFORMANCE PERIOD" means the period of time during
which the performance goals must be met to determine the
degree of payout or vesting with respect to certain
Performance-Based Awards.
"PERFORMANCE SHARE" means an Award granted to a
Participant, as described in Article 9.
"PERFORMANCE UNIT" means an Award granted to a
Participant, as described in Article 9.
"PERIOD OF RESTRICTION" means the period during which
the transfer of Shares of Restricted Stock is limited in some
way (based on the passage of time, the achievement of
performance goals or upon the occurrence of other events as
determined by the Committee (or the Board with respect to
Awards granted to Directors), at its discretion) and the
Shares are subject to a substantial risk of forfeiture, as
provided in Article 8.
"PERSON" shall have the meaning ascribed to the term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) thereof, except that the term shall not include
(a) the Company or any of its Affiliates, (b) a trustee or
other fiduciary holding
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March 6, 2002
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Company securities under an employee benefit plan of the
Company or any of its Affiliates, (c) an underwriter
temporarily holding securities pursuant to an offering of
those securities or (d) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company.
"RESTRICTED STOCK" means an Award granted to a
Participant pursuant to Article 8.
"RESTRICTED STOCK UNIT" means an Award granted to a
Participant, as described in Article 8.
"SHARES" means the common stock of the Company, $1.00
par value per share.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award,
granted alone or in connection with a related Option,
designated as an SAR, pursuant to the terms of Article 7.
"STOCK AWARD" means an Award granted pursuant to the
terms of Section 9.6.
"TANDEM SAR" means an SAR that is granted in
connection with a related Option pursuant to Article 7, the
exercise of which shall require forfeiture of the right to
purchase a Share under the related Option (and when a Share is
purchased under the Option, the Tandem SAR shall similarly be
canceled).
2.2 As used in this Plan, unless the context otherwise
expressly requires to the contrary, references to the singular include
the plural, and vice versa; references to the masculine include the
feminine and neuter; references to "including" mean "including (without
limitation)"; and references to Sections and Articles mean the sections
and articles of this Plan.
ARTICLE 3. ADMINISTRATION.
3.1 GENERAL. Subject to the terms and conditions of this
Plan, the Committee shall administer this Plan or, in the absence of
the Committee, the Board shall administer this Plan. The Board shall
appoint the members of the Committee, from time to time, who shall
serve at the discretion of the Board. The Committee shall have full and
exclusive power and authority to administer this Plan and to take all
actions that this Plan specifically contemplates or are necessary or
appropriate in connection with the administration of this Plan;
provided that the Board shall administer this Plan with respect to
Awards granted to Directors.
3.2 AUTHORITY OF THE COMMITTEE. Insofar as this Plan
relates to Awards to Employees, the Committee shall also have full and
exclusive power to interpret this Plan and to adopt such rules,
regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of
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March 6, 2002
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the Company and in keeping with the objectives of this Plan. The
Committee shall have full power to select Employees who shall
participate in this Plan, determine the sizes and types of Awards to
Employees and determine the terms and conditions of Awards to Employees
in a manner consistent with this Plan. The Committee may, in its
discretion, provide for the extension of the exercisability of an Award
to an Employee, accelerate the vesting or exercisability of an Award to
an Employee, eliminate or make less restrictive any restrictions
contained in an Award to an Employee, waive any restriction or other
provision of this Plan (insofar as such provision relates to Awards to
Employees) or an Award to an Employee or otherwise amend or modify an
Award to an Employee in any manner that is either (i) not adverse to
the Participant to whom the Award to an Employee was granted or (ii) to
which the Participant consents. The Committee may make an Award to an
individual who it expects to become an Employee of the Company or any
of its Affiliates within the next 6 months, with the Award being
subject to the individual's actually becoming an Employee within that
time period and subject to other terms and conditions as the Committee
may establish. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Plan or in any Award to
an Employee in the manner and to the extent the Committee deems
necessary or desirable to further this Plan's objectives. Further, the
Committee shall make all other determinations that may be necessary or
advisable for the administration of this Plan. As permitted by law and
the terms of this Plan, the Committee may delegate its authority as
identified in Section 3.3.
3.3 DELEGATION OF AUTHORITY. The Committee may delegate
to the Chief Executive Officer and to other senior officers of the
Company its duties under this Plan pursuant to such conditions or
limitations as the Committee may establish. The Committee may engage or
authorize the engagement of a third-party administrator to carry out
administrative functions under this Plan.
3.4 DECISIONS BINDING. All determinations and decisions
made by the Committee and the Board pursuant to the provisions of this
Plan and all related orders and resolutions of the Committee and the
Board shall be final, conclusive and binding on all persons, including
the Company, its stockholders, Directors, Employees, Participants and
the estates and beneficiaries of Directors, Employees and Participants.
Under no circumstances shall the Company incur
liability for any indirect, incidental, consequential or special
damages (including lost profits) of any form incurred by any person,
whether or not foreseeable and regardless of the form of the act in
which such a claim may be brought, with respect to this Plan or the
Company's role as Plan sponsor.
ARTICLE 4. SHARES SUBJECT TO PLAN AND MAXIMUM AWARDS.
4.1 NUMBER OF SHARES AVAILABLE FOR AWARDS. Subject to
adjustment as provided in Section 4.2, the number of Shares hereby
reserved for issuance to Participants under this Plan shall be 7
million, no more than 3 million of which may be granted in the form of
Awards other than in the form of Options. These Shares may consist of
authorized but unissued Shares or previously issued Shares reacquired
by the
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March 6, 2002
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Company. The number of Shares that are the subject of Awards under this
Plan that are forfeited or terminated, expire unexercised, are settled
in cash in lieu of Shares or in a manner such that all or some of the
Shares covered by an Award are not issued to a Participant or are
exchanged for Awards that do not involve Shares shall again immediately
become available to be issued pursuant to Awards granted under this
Plan. Shares approved pursuant to the Long Term Incentive Plan of Baker
Hughes Incorporated, as amended, the Baker Hughes Incorporated 1993
Stock Option Plan, as amended, and the Baker Hughes Incorporated 1998
Employee Stock Option Plan, as amended, that, upon shareholder approval
of this Plan, have not been awarded under such plans, including Shares
that are canceled, terminated, expired unexercised, settled in cash in
lieu of Shares or in a manner such that all or some of the Shares
covered thereby are not issued to a participant or are exchanged for a
consideration that does not involve Shares, and Shares that are so
canceled, terminated, expired unexercised, settled in cash in lieu of
Shares or in a manner such that all or some of the Shares covered
thereby are not issued to a participant or are exchanged for a
consideration that does not involve Shares, will immediately become
available for Awards under this Plan. The Shares described in the
foregoing sentence shall be included in the 7 million Shares reserved
for issuance under this Plan. The Committee shall determine the
appropriate methodology for calculating the number of Shares issued
pursuant to this Plan. The following rules ("Award Limitations") shall
apply to grants of such Awards under this Plan:
(a) OPTIONS. The maximum aggregate number of
Shares that may be granted in the form of Options pursuant to
any Award granted in any one Fiscal Year to any one Employee
shall be 3,000,000.
(b) SARS. The maximum aggregate number of Shares
that may be granted in the form of Stock Appreciation Rights
pursuant to any Award granted in any one Fiscal Year to any
one Employee shall be 3,000,000.
(c) RESTRICTED STOCK/UNITS. The maximum
aggregate grant with respect to Awards of Restricted
Stock/Units granted in any one Fiscal Year to any one Employee
shall be 1,000,000.
(d) PERFORMANCE SHARES/PERFORMANCE UNITS AND
CASH-BASED AWARDS. The maximum aggregate grant with respect to
Awards of Performance Shares made in any one Fiscal Year to
any one Employee shall be equal to the value of 1,000,000
Shares, determined as of the date of grant. The maximum
aggregate amount awarded or credited with respect to
Cash-Based Awards or Performance Units to any one Employee in
any one Fiscal Year may not exceed in value $10,000,000,
determined as of the date of grant.
(e) DIRECTOR AWARDS. The maximum aggregate grant
with respect to Awards of Options, Stock Awards or Restricted
Stock/Units granted in any one Fiscal Year to any one Director
shall be 10,000 Shares/Units.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. The existence of
outstanding Awards shall not affect in any manner the right or power of
the Company or its
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March 6, 2002
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stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital
stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior
preference stock (whether or not such issue is prior to, on a parity
with or junior to the Shares) or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business or any other corporate act or proceeding of any kind, whether
or not of a character similar to that of the acts or proceedings
enumerated above.
If there shall be any change in the Shares of the
Company or the capitalization of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, split up, spin-off, combination of shares,
exchange of shares, dividend in kind or other like change in capital
structure or distribution (other than normal cash dividends) to
stockholders of the Company, the Board, in its sole discretion, to
prevent dilution or enlargement of Participants' rights under this
Plan, shall adjust, in an equitable manner, as applicable, the number
and kind of Shares that may be issued under this Plan, the number and
kind of Shares subject to outstanding Awards, the exercise price
applicable to outstanding Awards, the Awards Limitations, the Fair
Market Value of the Shares and other value determinations applicable to
outstanding Awards. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized to issue or assume Awards by
means of substitution of new Awards, as appropriate, for previously
issued Awards or to assume previously issued Awards as part of such
adjustment. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized (a) to assume under the Plan
previously issued compensatory awards, or to substitute new Awards for
previously issued compensatory awards, including Awards, as part of
such adjustment or (b) to cancel Awards that are Options or SARs and
give the Participants who are the holders of such Awards notice and
opportunity to exercise for 30 days prior to such cancellation.
Appropriate adjustments may also be made by the Board
in the terms of any Awards under this Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an
equitable basis, including modifications of performance goals and
changes in the length of Performance Periods.
In addition, other than with respect to Options,
Stock Appreciation Rights and other Awards intended to constitute
Performance-Based Awards, the Board is authorized to make adjustments
to the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events affecting the Company or
the financial statements of the Company, or in response to changes in
applicable laws, regulations or accounting principles. The
determination of the Board as to the foregoing adjustments, if any,
shall be conclusive and binding on Participants under this Plan.
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March 6, 2002
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ARTICLE 5. ELIGIBILITY AND PARTICIPATION.
5.1 ELIGIBILITY. Persons eligible to participate in this
Plan include all Employees and Directors.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of
this Plan, the Committee may, from time to time, select from all
eligible Employees those to whom Awards shall be granted and shall
determine the nature and amount of each Award, subject to the
provisions of this Plan. The Board may, from time to time, select from
all eligible Directors those to whom Awards shall be granted and shall
determine the nature and amount of each Award, subject to the
provisions of this Plan.
ARTICLE 6. STOCK OPTIONS.
6.1 GRANT OF OPTIONS. Subject to the terms and provisions
of this Plan, Options may be granted to Participants in such number,
upon the terms and at any time, and from time to time, as the Committee
(or the Board with respect to Awards granted to Directors) shall
determine.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced
by an Award Agreement that shall specify the Option Price, the duration
of the Option, the number of Shares to which the Option pertains, and
other provisions as the Committee (or the Board with respect to Awards
granted to Directors) shall determine that are not inconsistent with
the terms of this Plan. The Award Agreement also shall specify whether
the Option is intended to be an ISO or a NQSO. Notwithstanding its
designation as an ISO in the Award Agreement, to the extent the
limitations of Code Section 422 are exceeded, with respect to such
excess portion, the Option shall become a NQSO. Employees may be
awarded ISOs (except those who have not yet commenced employment with
the Company or any of its Affiliates may not receive ISOs) and NQSOs,
whereas Directors may only be awarded NQSOs.
6.3 OPTION PRICE. The Committee (or the Board with
respect to Awards granted to Directors) shall determine the Option
Price for each grant of an Option under this Plan. The Option Price
shall not be less than the Fair Market Value of the Shares on the date
of grant.
6.4 DURATION OF OPTIONS. Each Option granted to a
Participant shall expire at the time the Committee (or the Board with
respect to Awards granted to Directors) shall determine at the time of
grant; provided that no Option shall be exercisable later than the
tenth anniversary date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under this
Article 6 shall be exercisable at the times and be subject to the
restrictions and conditions as the Committee (or the Board with respect
to Awards granted to Directors) shall in each instance approve, which
need not be the same for each grant or for each Participant.
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March 6, 2002
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6.6 PAYMENT. Options granted under this Article 6 shall
be exercised in the form and manner as the Committee (or the Board with
respect to Awards to Directors) shall determine from time to time.
The Option Price upon exercise of any Option shall be
payable to the Company in full either (a) in cash or its equivalent;
(b) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price
(provided that the Shares that are tendered must have been held by the
Participant for at least 6 months prior to their tender to satisfy the
Option Price); (c) by a combination of (a) and (b); or (d) any other
method approved by the Committee (or the Board with respect to Awards
granted to Directors) in its sole discretion at the time of grant and
as set forth in the Award Agreement. An Award Agreement evidencing an
Option may, in the discretion of the Committee (or the Board with
respect to Awards granted to Directors), provide for a "cashless
exercise" of an Option by establishing procedures whereby the
Participant, by a properly executed written notice, directs (1) an
immediate sale or margin loan respecting all or a part of the Shares to
which he is entitled upon exercise pursuant to an extension of credit
by the Company to the Participant of the Option Price, (2) the delivery
of the Shares from the Company directly to a brokerage firm and (3) the
delivery of the Option Price from sale or margin loan proceeds from the
brokerage firm directly to the Company.
Subject to any governing rules or regulations and
Section 18.10, after the exercise of the Option and full payment of the
Option Price in the form and manner as the Committee (or Board with
respect to Awards granted to Directors) shall determine, the
Participant may pay the required fee and request a Share certificate
based upon the number of Shares purchased under the Option through the
third-party administrator designated by the Committee (or the Board
with respect to Awards granted to Directors) to have this
administrative duty. In addition, the Company may, at its option, issue
or cause to be issued Share certificates.
Unless otherwise determined by the Committee (or the
Board with respect to Awards granted to Directors), all payments under
all of the methods indicated above shall be paid in United States
dollars.
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee
(or the Board with respect to Awards granted to Directors) may impose
such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may deem advisable, including
restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are
then listed or traded and under any blue sky or state securities laws
applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT/DIRECTORSHIP.
(a) Each Participant's Award Agreement shall set
forth the extent to which the Participant shall have the right
to exercise the Option following termination of the
Participant's employment or directorship with the Company or
its Affiliates. Such provisions shall be determined in the
sole discretion of the
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March 6, 2002
13
Committee (or the Board with respect to Awards granted to
Directors), shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all
Options issued pursuant to this Article 6 and may reflect
distinctions based on the reasons for termination.
(b) TERMS FOR DIRECTOR OPTIONS.
(i) Each Option granted to a Director
(a "Director Option") shall have a term of 10 years
from the date of grant, notwithstanding any earlier
termination of the status of the holder as a Director
(the "Option Expiration Date").
(ii) The purchase price of each Share
subject to a Director Option shall be equal to the
Fair Market Value of a Share on the date of grant.
(iii) All Director Options shall vest and
become exercisable on the first anniversary of the
date of grant.
(iv) a Director's directorship shall
terminate at the close of business on the day
preceding the day he ceases to be a member of the
Board for any reason whatsoever. When a Director's
directorship is terminated, each of his Director
Options and all rights thereunder shall expire in
accordance with the following (but in no event later
than the Option Expiration Date):
(A) Director Options granted
within 1 year preceding termination:
(1) At the time the
Director's directorship is
terminated, unless
(2) Such termination occurs
in connection with, or within 2
years following, a Change in
Control, in which case, 30 days
following his termination.
(B) Director Options granted
prior to 1-year preceding termination:
(1) 1 year after
termination if due to the
Director's death (a Director's
Option may be exercised by the
Director's estate or by the person
or persons who acquire the right to
exercise his option by bequest or
inheritance with respect to any or
all of the Shares remaining subject
to his Director Option at the time
of his death); or
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March 6, 2002
14
(2) 3 years after
termination if as a result of
resignation or removal from the
Board because of disability or in
accordance with the provisions of
the Company's Bylaws regarding
termination of director's terms of
office; or
(3) 3 months after
termination if, for any reason
other than specified above.
(c) AGREEMENTS. Any Award of Director Options
shall be embodied in an Award Agreement, which shall contain
the terms, conditions and limitations set forth above and
shall be signed by an authorized officer for and on behalf of
the Company.
6.9 TRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted
under this Plan may be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. Further, all ISOs
granted to a Participant under this Plan shall be exercisable
during his or her lifetime only by the Participant, and after
that time, by the Participant's heirs or estate.
(b) NONQUALIFIED STOCK OPTIONS. Except as
otherwise provided in a Participant's Award Agreement, no NQSO
granted under this Article 6 may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.
Further, except as otherwise provided in a Participant's Award
Agreement, all NQSOs granted to a Participant under this
Article 6 shall be exercisable during his or her lifetime only
by such Participant.
Any attempted assignment of an Option in violation of
this Section 6.9 shall be null and void.
6.10 NOTIFICATION OF DISQUALIFYING DISPOSITION. If any
Participant shall make any disposition of Shares issued pursuant to the
exercise of an ISO under the circumstances described in Code Section
421(b) (relating to certain disqualifying dispositions), such
Participant shall notify the Company of such disposition within 10 days
thereof.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 GRANT OF SARS. Subject to the terms and conditions of
this Plan, SARs may be granted to an Employee at any time, and from
time to time, as the Committee shall determine. The Committee may grant
Freestanding SARs, Tandem SARs or any combination of these forms of
SAR.
Subject to the terms and conditions of this Plan, the
Committee shall have complete discretion in determining the number of
SARs granted to each Employee and,
Baker Hughes Incorporated
March 6, 2002
15
consistent with the provisions of this Plan, in determining the terms
and conditions pertaining to such SARs.
The grant price of a Freestanding SAR shall not be
less than the Fair Market Value of a Share on the date of grant of the
SAR. The grant price of Tandem SARs shall equal the Option Price of the
related Option.
7.2 SAR AGREEMENT. Each SAR grant shall be evidenced by
an Award Agreement that shall specify the grant price, the term of the
SAR and such other provisions as the Committee shall determine.
7.3 TERM OF SARS. The term of an SAR granted under this
Plan shall be determined by the Committee, in its sole discretion;
provided that no SAR shall be exercisable later than the tenth
anniversary date of its grant.
7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may
be exercised upon whatever terms and conditions the Committee, in its
sole discretion, imposes upon them.
7.5 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised
for all or part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the
related Option. A Tandem SAR may be exercised only with respect to the
Shares for which its related Option is then exercisable.
7.6 PAYMENT OF SAR AMOUNT. Upon the exercise of an SAR,
an Employee shall be entitled to receive payment from the Company in an
amount determined by multiplying:
(a) The difference between the Fair Market Value
of a Share on the date of exercise over the grant price by
(b) The number of Shares with respect to which
the SAR is exercised.
At the discretion of the Committee, the payment upon
SAR exercise may be in cash, in Shares of equivalent value, in some
combination thereof or in any other manner approved by the Committee in
its sole discretion. The Committee's determination regarding the form
of SAR payout may be set forth in the Award Agreement pertaining to the
grant of the SAR.
7.7 TERMINATION OF EMPLOYMENT. Each Award Agreement shall
set forth the extent to which the Employee shall have the right to
exercise the SAR following termination of the Employee's employment
with the Company or its Affiliates. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award
Agreement entered into with Employees, need not be uniform among all
SARs issued pursuant to this Plan and may reflect distinctions based on
the reasons for termination.
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March 6, 2002
16
7.8 NONTRANSFERABILITY OF SARS. Except as otherwise
provided in an Employee's Award Agreement, no SAR granted under this
Plan may be sold, transferred, pledged, assigned or otherwise alienated
or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in an Employee's
Award Agreement, all SARs granted to an Employee under this Plan shall
be exercisable during his or her lifetime only by the Employee, and
after that time, by the Employee's heirs or estate. Any attempted
assignment of an SAR in violation of this Section 7.8 shall be null and
void.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS.
8.1 GRANT OF RESTRICTED STOCK/UNITS. Subject to the terms
and provisions of this Plan, the Committee (or the Board with respect
to Awards granted to Directors), at any time, and from time to time,
may grant Shares of Restricted Stock and Restricted Stock Units to
Participants in such amounts as the Committee (or the Board with
respect to Awards granted to Directors) shall determine. Restricted
Stock Units shall be similar to Restricted Stock, except that no Shares
are actually awarded to the Participant until a later date, unless the
payout is otherwise made in cash.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock or
Restricted Stock Unit grant shall be evidenced by an Award Agreement
that shall specify the Period(s) of Restriction, the number of Shares
of Restricted Stock (or the number of Restricted Stock Units) granted
and such other provisions as the Committee (or the Board with respect
to Awards granted to Directors) shall determine.
8.3 TRANSFERABILITY. Except as provided in this Article
8, the Shares of Restricted Stock or Restricted Stock Units granted
herein may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee (or the Board with respect to
Awards granted to Directors) and specified in the Award Agreement, or
upon earlier satisfaction of any other conditions, as specified by the
Committee (or the Board with respect to Awards granted to Directors) in
its sole discretion and set forth in the Award Agreement. All rights
with respect to the Restricted Stock or Restricted Stock Units granted
to a Participant under this Plan shall be available during his or her
lifetime only to the Participant, and after that time, to the
Participant's heirs or estate. Any attempted assignment of Restricted
Stock or Restricted Stock Units in violation of this Section 8.3 shall
be null and void.
8.4 OTHER RESTRICTIONS. The Committee (or the Board with
respect to Awards granted to Directors) shall impose other conditions
or restrictions on any Shares of Restricted Stock or Restricted Stock
Units granted pursuant to this Plan as it may deem advisable, including
a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit,
restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the
performance goals, time-based restrictions or restrictions under
applicable federal or state securities laws.
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March 6, 2002
17
To the extent deemed appropriate by the Committee (or
the Board with respect to Awards granted to Directors), the designated
third-party administrator may retain the certificates representing
Shares of Restricted Stock in its possession until such time as all
conditions and restrictions applicable to such Shares have been
satisfied or lapse.
Except as otherwise provided in this Article 8,
Shares of Restricted Stock covered by each Restricted Stock Award shall
become freely transferable by the Participant after all conditions and
restrictions applicable to such Shares have been satisfied or lapse.
8.5 VOTING RIGHTS. To the extent permitted by the
Committee (or the Board with respect to Awards granted to Directors) or
required by law, Participants holding Shares of Restricted Stock
granted hereunder may be granted the right to exercise full voting
rights with respect to those Shares during the Period of Restriction. A
Participant shall have no voting rights with respect to any Restricted
Stock Units granted hereunder.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period
of Restriction, Participants holding Shares of Restricted Stock or
Restricted Stock Units granted hereunder may, if the Committee (or the
Board with respect to Awards granted to Directors) so determines, be
credited with dividends paid with respect to the underlying Shares
while they are so held in a manner determined by the Committee (or the
Board with respect to Awards granted to Directors) in its sole
discretion. The Committee (or the Board with respect to Awards granted
to Directors) may apply any restrictions to the dividends that it deems
appropriate.
8.7 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Award
Agreement shall set forth the extent to which the Participant shall
have the right to receive unvested Restricted Stock and/or Restricted
Stock Units following termination of the Participant's employment or
directorship with the Company or its Affiliates. Such provisions shall
be determined in the sole discretion of the Committee (or the Board
with respect to Awards granted to Directors), shall be included in the
Award Agreement entered into with each Participant, need not be uniform
among all Shares of Restricted Stock or Restricted Stock Units issued
pursuant to this Plan and may reflect distinctions based on the reasons
for termination.
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED AWARDS;
STOCK AWARDS.
9.1 GRANT OF PERFORMANCE UNITS/SHARES AND CASH-BASED
AWARDS. Subject to the terms of this Plan, Performance Units,
Performance Shares and/or Cash-Based Awards may be granted to Employees
in such amounts and upon such terms, and at any time and from time to
time, as the Committee shall determine.
9.2 VALUE OF PERFORMANCE UNITS/SHARES AND CASH-BASED
AWARDS. Each Performance Unit shall have an initial value that the
Committee shall establish at the time of grant. Each Performance Share
shall have an initial value equal to the Fair Market
Baker Hughes Incorporated
March 6, 2002
18
Value of a Share on the date of grant. Each Cash-Based Award shall have
a value as the Committee may determine. The Committee shall set
performance goals in its discretion that, depending on the extent to
which they are met, shall determine the number and value of Performance
Units/Shares and Cash-Based Awards which shall be paid out to the
Employee.
9.3 EARNING OF PERFORMANCE UNITS/SHARES AND CASH-BASED
AWARDS. Subject to the terms of this Plan, after the applicable
Performance Period has ended, the holder of Performance Units/Shares
and Cash-Based Awards shall be entitled to receive payout on the number
and value of Performance Units/Shares and Cash-Based Awards the
Employee earned over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals
have been achieved.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE
UNITS/SHARES AND CASH-BASED AWARDS. Payment of earned Performance
Units/Shares and Cash-Based Awards shall be as the Committee determines
and as set forth in the Award Agreement. Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares and Cash-Based Awards in the form of cash or in Shares (or
in a combination thereof) that have an aggregate Fair Market Value
equal to the value of the earned Performance Units/Shares and
Cash-Based Awards at the close of the applicable Performance Period.
Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee.
At the discretion of the Committee, Employees holding
Performance Units/Shares may be entitled to receive dividend units with
respect to dividends declared with respect to the Shares. Such
dividends may be subject to the same accrual, forfeiture and payout
restrictions as apply to dividends earned with respect to Shares of
Restricted Stock, as set forth in Section 8.6, as determined by the
Committee.
9.5 NONTRANSFERABILITY. Except as otherwise provided in
an Employee's Award Agreement, Performance Units/Shares and Cash-Based
Awards may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent
and distribution. Further, except as otherwise provided in an
Employee's Award Agreement, an Employee's rights under this Plan shall
be exercisable during the Employee's lifetime only by the Employee, and
after that time, by the Employee's heirs or estate. Any attempted
assignment of Performance Units/Shares or Cash-Based Awards in
violation of this Section 9.5 shall be null and void.
9.6 STOCK AWARDS. Employees or Directors may be granted
Stock Awards. The Committee (or the Board with respect to Awards
granted to Directors) may grant other types of equity-based or
equity-related Awards (including the grant or offer for sale of
unrestricted Shares) in such amounts and subject to such terms and
conditions, as the Committee (or the Board with respect to Awards
granted to Directors) shall determine. Such Awards may entail the
transfer of actual Shares to Participants or payment in cash or
otherwise of amounts based on the value of Shares and may include
Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.
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March 6, 2002
19
ARTICLE 10. PERFORMANCE MEASURES.
Performance measures, the attainment of which may determine
the degree of payout or vesting with respect to certain Performance-Based
Awards, shall be chosen from among:
(a) Net earnings;
(b) Earnings per share;
(c) Net sales growth;
(d) Net income (before or after taxes);
(e) Net operating profit;
(f) Return measures (including return on assets, equity,
net capital employed or sales);
(g) Cash flow (including operating cash flow and free
cash flow);
(h) Cash flow return on investments, which equals net
cash flows divided by owner's equity;
(i) Earnings before or after taxes, interest,
depreciation and/or amortization;
(j) Internal rate of return or increase in net present
value;
(k) Dividend payments to parent;
(l) Gross revenues;
(m) Gross margins;
(n) Operating margin;
(o) Share price (including growth measures and total
shareholder return);
(p) Expense targets;
(q) Working capital targets relating to inventory or
accounts receivable;
(r) Planning accuracy (as measured by comparing planned
results to actual results);
(s) Comparisons to various stock market indices;
(t) Comparisons to the performance of other companies;
and
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March 6, 2002
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(u) Baker Value Added.
The Committee may, in its sole discretion, adopt other
performance measures including any combination of the foregoing.
The Committee may provide in any such Performance-Based Award
that any evaluation of performance may exclude any of the following events that
occurs during a Performance Period: (a) asset write-downs; (b) litigation or
claim judgments or settlements; (c) the effect of changes in tax laws,
accounting principles or other laws or provisions affecting reported results;
(d) accruals for reorganization and restructuring programs; (e) extraordinary
nonrecurring items as described in Accounting Principles Board Opinion No. 30 or
in management's discussion and analysis of financial condition and results of
operations appearing in the Company's annual report to stockholders for the
applicable year; (f) acquisitions or divestitures and (g) foreign exchange gains
and losses.
ARTICLE 11. BENEFICIARY DESIGNATION.
Each Participant under this Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under this Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company and shall be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 12. DEFERRALS.
The Committee (or the Board with respect to Awards granted to
Directors) may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock/Units or the
satisfaction of any requirements or goals with respect to Performance
Units/Shares, Cash-Based Awards and Stock Awards. If any such deferral election
is required or permitted, the Committee (or the Board with respect to Awards
granted to Directors) shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES/DIRECTORS.
13.1 EMPLOYMENT. Nothing in this Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, nor confer upon any Participant
any right to continue in the employ of the Company.
Except as specifically provided otherwise in a written
agreement with the Company, neither the Award nor any benefits arising
under this Plan shall constitute part of a Participant's employment
contract with the Company or any Affiliate. Any termination of this
Plan pursuant to Section 15.1 shall not give rise to liability on the
part of the Company or any Affiliate for severance payments.
Baker Hughes Incorporated
March 6, 2002
21
13.2 PARTICIPATION. No Employee or Director shall have the
right to be selected to receive an Award under this Plan or, having
been so selected, to be selected to receive a future Award.
13.3 RIGHTS AS A STOCKHOLDER. A Participant shall have none of
the rights of a stockholder with respect to Shares covered by any Award
until the Participant becomes the record holder of such shares.
ARTICLE 14. ACCELERATION.
14.1 CHANGE IN CONTROL. Notwithstanding any provision of this
Plan to the contrary, in the event of an occurrence of a Change in
Control other than an event described only in Section (c) of the
definition of Change in Control, (a) all Awards granted pursuant to
this Plan shall become fully vested, (b) if either an Option or SAR or
similar Award, the Award shall become immediately exercisable and (c)
all conditions or restrictions applicable to an Award shall be deemed
satisfied or shall lapse.
14.2 TERMINATION. Notwithstanding any provision of this Plan
to the contrary, all conditions or restrictions on outstanding Awards
held by an Employee shall be deemed satisfied or shall lapse, all
outstanding Awards held by an Employee shall become fully vested and,
if either an Option or SAR or similar Award, immediately exercisable as
of the effective date of termination of such Employee's employment if
(a) such Employee's employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a
Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (b) such
Employee terminates his or her employment for Good Reason prior to a
Change in Control (whether or not a Change in Control ever occurs) and
the circumstance or event which constitutes Good Reason occurs at the
request or direction of the Person described in clause (a), (c) such
Employee's employment is terminated by the Company without Cause or by
the Employee for Good Reason and such termination or the circumstance
or event which constitutes Good Reason is otherwise in connection with
or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs) or (d) such Employee's employment is terminated by
the Company without Cause or by the Employee for Good Reason, in either
case within 2 years following the occurrence of a Change in Control
described in Section (c) of the definition of Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION.
15.1 AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION.
Subject to the terms of this Plan, the Board may at any time and from
time to time alter, amend, modify, suspend or terminate this Plan in
whole or in part, except that no amendment, modification, suspension or
termination that would adversely affect in any material way the rights
of any Participant under any Award previously granted to such
Participant under this Plan shall be made without the written consent
of such Participant or to the extent stockholder approval is otherwise
required by applicable legal requirements. Without the prior approval
of the Company's stockholders, Options issued under this
Baker Hughes Incorporated
March 6, 2002
22
Plan will not be repriced, replaced, or regranted through cancellation,
or by lowering the Option Price of a previously granted Award.
15.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN
UNUSUAL OR NONRECURRING EVENTS. The Board may make adjustments in the
terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including the events
described in Section 4.2) affecting the Company or the financial
statements of the Company or of changes in applicable laws, regulations
or accounting principles, whenever the Board determines that such
adjustments are appropriate to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be made
available under this Plan.
ARTICLE 16. WITHHOLDING.
16.1 TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the
Company, the minimum statutory amount to satisfy federal, state and
local taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of this
Plan.
16.2 SHARE WITHHOLDING. With respect to withholding required
upon the exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock and Restricted Stock Units, or upon any other taxable
event arising as a result of Awards granted hereunder, Participants may
elect to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the
date the tax is to be determined equal to the minimum statutory total
tax that could be imposed on the transaction. All such elections shall
be irrevocable, made in writing and signed by the Participant and shall
be subject to any restrictions or limitations that the Committee (or
the Board with respect to Awards granted to Directors), in its sole
discretion, deems appropriate.
ARTICLE 17. SUCCESSORS.
All obligations of the Company under this Plan with respect to
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 18. GENERAL PROVISIONS.
18.1 RESTRICTIONS AND LEGEND. No Shares or other form of
payment shall be issued with respect to any Award unless the Company
shall be satisfied based on the advice of its counsel that such
issuance will be in compliance with applicable federal and state
securities laws. Certificates evidencing Shares delivered under this
Plan (to the extent that such shares are so evidenced) may be subject
to such restrictions as the Committee (or the Board with respect to
Awards granted to Directors) may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system
upon
Baker Hughes Incorporated
March 6, 2002
23
which the Shares are then listed or to which they are admitted for
quotation and any applicable federal or state securities law. The
Committee (or the Board with respect to Awards granted to Directors)
may cause a legend or legends to be placed upon such certificates (if
any) to make appropriate reference to such restrictions.
The Committee (or the Board with respect to Awards
granted to Directors) may require each person receiving Shares pursuant
to an Award under this Plan to represent to and agree with the Company
in writing that the Participant is acquiring the Shares without a view
to distribution thereof. In addition to any other legend required by
this Plan, the certificates for such Shares may include any legend
which the Committee (or the Board with respect to Awards granted to
Directors) deems appropriate to reflect any restrictions on transfer of
such Shares.
18.2 SEVERABILITY. If any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Plan, and this Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
18.3 REQUIREMENTS OF LAW. The granting of Awards and the
issuance of Shares under this Plan shall be subject to all applicable
laws, rules and regulations and to such approvals by any governmental
agencies or national securities exchanges as may be required. The
Company shall receive the consideration required by law for the
issuance of Awards under this Plan.
18.4 SECURITIES LAW COMPLIANCE. All transactions under this
Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successor under the Exchange Act, unless determined
otherwise by the Board. To the extent any provision of this Plan or
action by the Board fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
18.5 LISTING. The Company may use reasonable endeavors to
register Shares allotted pursuant to the exercise of an Award with the
Securities and Exchange Commission or to effect compliance with the
registration, qualification and listing requirements of any national
securities laws, stock exchange or automated quotation system.
18.6 DELIVERY OF TITLE. The Company shall have no obligation
to issue or deliver evidence of title for Shares under this Plan prior
to:
(a) Obtaining any approvals from governmental agencies
that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification
of the Shares under any applicable national or foreign law or
ruling of any governmental body that the Company determines to
be necessary or advisable.
18.7 INABILITY TO OBTAIN AUTHORITY. The inability of the
Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the
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March 6, 2002
24
Company's counsel to be necessary to the lawful issuance and sale of
any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
18.8 INVESTMENT REPRESENTATIONS. As a condition to the
exercise of an Award, the Company may require the person exercising
such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion
of counsel for the Company, such a representation is required.
18.9 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES.
Notwithstanding any provision of this Plan to the contrary, in order to
comply with the laws in other countries in which the Company and its
Affiliates operate or have Employees, the Committee, in its sole
discretion, shall have the power and authority to:
(a) Determine which Affiliates shall be covered by this
Plan;
(b) Determine which Employees employed outside the United
States are eligible to participate in this Plan;
(c) Modify the terms and conditions of any Award granted
to Employees who are employed outside the United States to
comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and
other terms and procedures to the extent such actions may be
necessary or advisable. Any subplans and modifications to Plan
terms and procedures established under this Section 18.9 by
the Committee shall be attached to this Plan document as
Appendices; and
(e) Take any action, before or after an Award is made,
that it deems advisable to obtain approval or comply with any
necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any
actions hereunder, and no Awards shall be granted, that would violate
the Exchange Act, the Code, any securities law or governing statute or
any other applicable law.
18.10 UNCERTIFICATED SHARES. To the extent that this Plan
provides for issuance of certificates to reflect the transfer of
Shares, the transfer of such Shares may be effected on a
noncertificated basis, to the extent not prohibited by applicable law
or the rules of any stock exchange.
18.11 UNFUNDED PLAN. Participants shall have no right, title
or interest whatsoever in or to any investments that the Company may
make to aid it in meeting its obligations under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Participant,
beneficiary, legal representative
Baker Hughes Incorporated
March 6, 2002
25
or any other person. To the extent that any Person acquires a right to
receive payments from the Company under this Plan, such right shall be
no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the
general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure
payment of such amounts, except as expressly set forth in this Plan.
This Plan is not intended to be subject to ERISA.
18.12 NO FRACTIONAL SHARES. No fractional Shares shall be
issued or delivered pursuant to this Plan or any Award. The Committee
(or the Board with respect to Awards granted to Directors) shall
determine whether cash, Awards or other property shall be issued or
paid in lieu of fractional Shares or whether such fractional Shares or
any rights thereto shall be forfeited or otherwise eliminated.
18.13 GOVERNING LAW. This Plan and each Award Agreement shall
be governed by the laws of the State of Texas, excluding any conflicts
or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan to the substantive law of
another jurisdiction. Unless otherwise provided in the Award Agreement,
recipients of an Award under this Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of
Harris County, Texas to resolve any and all issues that may arise out
of or relate to this Plan or any related Award Agreement.
Baker Hughes Incorporated
March 6, 2002
26